Overall, members of the European Parliament’s Committee on the Environment, Public Health and Food Safety (ENVI) on Wednesday 28 October welcomed a report by MEP Yannick Jadot (Greens/EFA, France) on the creation of a European carbon adjustment mechanism at the EU’s borders to combat carbon leakage.
The problem of carbon leakage, which is likely to intensify as a result of the strengthening of EU climate policies, is currently being addressed by the Union through the allocation of free carbon allowances under the European Emissions Trading Scheme (ETS) to sectors and sub-sectors considered to be at significant risk of carbon leakage.
Compatibility with ETS
While there is a broad consensus in the EU on the need for a carbon border adjustment mechanism, the modalities of its implementation still divide the political groups in Parliament.
While Mr Jadot prefers that a ‘mirror’ mechanism to the ETS be created and advocates ending free allowances in the forthcoming revision of the ETS (see EUROPE 12587/17), EPP shadow rapporteur Adam Jarubas (Poland) argued that the carbon border adjustment mechanism must be compatible with free allowances.
The EPP group considers that the revision of the ETS goes beyond the scope of Mr Jadot’s report and should rather be the subject of a separate own-initiative report, Mr Jarubas added.
Unlike Mr Jarubas, the shadow rapporteur for the S&D group, Mohammed Chahim (the Netherlands) replied that he “sees a link between the two systems”. In his view, there is a need to review the current system for allocating free allowances in order to ensure consistency between the revised ETS and the carbon adjustment mechanism.
The rapporteur for the opinion of the Parliament’s Committee on Economic and Monetary Affairs (ECON), Luis Garicano (Renew Europe, Spain), for his part, said that his committee supports the option of a ‘mirror’ mechanism to the ETS system and considers that this new mechanism “gives us the possibility to get rid of free allocations”.
On the other hand, the shadow rapporteur for the GUE/NGL, Manuel Bompard (France), denounced the idea of linking the mechanism in one way or another to the ETS, deeming the latter ineffective. All the studies show that the ETS “has failed”, because the capping on the number of emission allowances is too high in relation to actual emissions and the free allowance system covers about 90% of industrial emissions, he estimated.
Therefore, he advocated moving towards the introduction of targets for imported emissions, which would be progressively reduced.
A member of the European Commission's Directorate-General for Taxation and Customs Union (DG TAXUD), David Boublil stated that “the carbon adjustment is intended to replace free quotas”. He also stressed that whichever option is chosen, the objective is to have the same carbon price in the EU and on imports.
Many grey areas
MEPs also identified a number of issues that still need to be clarified, such as the compatibility of such a mechanism with World Trade Organization (WTO) rules, how to calculate a product’s carbon footprint or the application of possible exemptions for least developed countries.
The idea of a carbon border adjustment mechanism “requires more technical and legal studies”, said Laura Huhtasaari (Finland), shadow rapporteur for the ID group.
Agreeing with her, Mr Chahim recommended waiting for the results of the Commission’s impact studies (scheduled for the end of the year) before opting for one solution over another.
In his opinion, Parliament’s report should thus consist of a set of recommendations to the Commission, taking up, for example, a number of elements that MEPs would like to see in the impact assessments.
Concluding the debate, Mr Jadot stressed that the report “will not necessarily contain the answers on the type of provision (to be implemented)”. (Original version in French by Damien Genicot)